Brazil: Current account swings into deficit in September
Brazil’s current account recorded a deficit of USD 1.7 billion in September, deteriorating from the USD 0.3 billion shortfall recorded in September 2020 and contrasting the USD 1.8 billion surplus clocked in August of this year.
September’s result largely reflected a lower goods surplus, with both the primary income account deficit and the services account shortfall reducing compared to a year ago. Meanwhile, net foreign investment strengthened in the month, totaling USD 4.5 billion (September 2020: USD 3.4 billion).
Accordingly, the 12-month sum of the current balance widened slightly to a USD 20.7 billion deficit from the USD 19.3 billion shortfall recorded in August, which was equivalent to approximately 1.3% of GDP (August: Approximately 1.2% of GDP).
Commenting on the outlook for Brazil’s current account, Alberto Ramos, economist at Goldman Sachs, noted:
“Overall, the short-term current account dynamics remain benign given still solid export demand and terms of trade compounded by a weak/competitive real effective exchange rate. However, beyond favorable cyclical dynamics, a deep fiscal adjustment to reduce the highly negative public sector savings remains key to enable a permanent structural current account adjustment (rather than just a cyclical adjustment driven by the weak below-potential domestic demand).”